True Health care reform will require elimination of excess spending of Health care dollars - Economists warn
24 11 08 - 13:05
Health Care
The U.S. spends $2.3 trillion per year on health care — almost twice as much per person as other industrialized nations — but we aren’t getting what we pay for. Studies show that fully a third of spending is wasted on treatments, drugs, and tests that don’t improve Americans’ health outcomes and that adults receive recommended treatments for many illnesses only 55% of the time.
Economists warn that unless we can eliminate excess spending and put health-care dollars to better use, rising health-care costs will present a growing threat to our global competitiveness and long-term fiscal security.
Laura Landro, an assistant managing editor at The Wall Street Journal, moderated the task-force discussion on health. Here are edited excerpts of the presentation of their priorities to the CEO Council.
LAURA LANDRO: We actually had a very, very tight race in health care and I think even some of us were a little surprised at the way things came out. IÂ’ll first ask Denis Cortese to start with what came out No. 1 on our list, which was to fight obesity.
DENIS CORTESE: This was an interesting discussion. It came up in the realm of prevention, but the obesity component so highly resonated with the group that it rose as a point all by itself. The issue of education, the issue of physical exercise, the issue of having physical exercise as part of the school activities all became important components of this discussion, because the estimates of unfunded liabilities that we have into the future, particularly for Medicare, do not include the impact of obesity. No oneÂ’s really estimated that just yet.
MS. LANDRO: The second one that came up on the list — again, we were all a little surprised at this — was tort reform. Dan Vasella is going to explain in more detail about the vaccine model to reform malpractice.
DANIEL VASELLA: The vaccine [business] has completely changed because of litigation. Companies left the industry, and only with the bird flu did people start to ask, why aren’t more companies in the vaccine business? And it turns out that the whole litigation issue around vaccines was a big deterrent for any pharmaceutical company to be in that field, and only when tort reform happened — [when what people could get] was capped and it was made more difficult — that really changed. Now more players are interested than they were before.
We have to be aware that the tort system is estimated to cost about $246 billion a year in the U.S. In the health-care arena, PriceWaterhouseCoopers estimated that itÂ’s about $124 billion a year. So itÂ’s not something you can lightly disregard.
I would also add from my own perspective and learning of the U.S. system that it was extremely frustrating for me when we were told by the lawyers you have to settle, even if we thought that we have done nothing wrong, because it was less expensive and less cumbersome.
So basically we have a judiciary system which I think is not really doing justice in this regard.
ANGELA BRALY: One of the other things that youÂ’re going to hear from us is about the concern that this litigation or the threat of litigation stifles the quality discussion, because weÂ’re in an environment where we cannot as clearly discuss errors and address them in a high-quality way.
What Is Quality?
MS. LANDRO: Defining and measuring value seems like a vague term. But for the way weÂ’ve defined it, weÂ’re going to turn to Denis Cortese.
MR. CORTESE: When we talk about the No. 1 problem with regard to health care, most people would say weÂ’re not getting what we pay for. And by saying that, youÂ’re really saying the value equation, and the question becomes what is in the numerator? We can measure the cost pretty well. But whatÂ’s in the numerator? What is the quality equation? Most people stumble and they say, how do you really measure quality? What can you really do?
It is very interesting. ItÂ’s real easy for people to say weÂ’re not getting what weÂ’re paying for, which implies you know what quality is. Somebody knows it somewhere. So why donÂ’t we begin to measure the elements of quality, and those elements are actually quite measurable. TheyÂ’re the outcomes that you desire, particularly around a particular disease. You can measure those.
We would propose that you might start with maybe the top five diseases in the country. Those top five diseases probably account for roughly 60% to 70% of all the spending, especially in the Medicare environment.
You begin to measure the outcomes. Safety is another numerator element. Safety is easy. It should be zeros. The third is service: access for care, patient satisfaction, etc. These are all measurable. So making it an effort to really measure, define and measure value is crucial because weÂ’re going to propose that pay be related to the outcomes of those measurements.
Information technology is listed in here as one of the tools to help capture that. And all of you in your businesses, you actually make value-based purchases all the time and you are being advised on how to do that. So if we can move Medicare to an environment where they start paying for value, that would begin to drive the system. Medicare is starting to pay based on value, and there are many sources of those value-equation numbers.
JEFFREY KINDLER: There are a lot of ideas and discussions that cost money. WeÂ’re in a serious deficit environment. How are we going to pay for all this? One of the reasons I believe we have to measure value is because if we actually believe that investing in prevention and wellness is going to improve productivity, is going to help with jobs, is going to support innovation, and everything else weÂ’ve talked about, we better be able to measure that and prove that weÂ’re doing it.
We will not be able to do comprehensive health-care reform without some approach to the scoring of the bill that recognizes that these are investments rather than costs. Otherwise weÂ’re never going to get anywhere. Unless we can define that value, understand what it is, look at it on a somewhat longer-term basis and then recognize what we are getting for our investment rather than our cost, we will constantly be up against this pressure to cut short-term costs, which is the exact opposite of what we should be doing.
We should be investing. We should obviously not spend money on wasteful things, but where we can invest in prevention, we must be doing so because we believe in the long run it will pay for itself. If we canÂ’t measure that and define it, we wonÂ’t get anywhere.
MS. LANDRO: Right, which is why the IT thing comes into all of this, but really in the payment-reform space. Angela, can you explain that to the group?
MS. BRALY: WeÂ’ve been talking a lot about value, and the issue is the way that we pay for health care now doesnÂ’t enhance and encourage value. Specifically, we need to focus on paying for prevention. WeÂ’re going to have to transform the reimbursement system to focus on paying for prevention. We want to make sure there are mechanisms in the reimbursement system to do that.
We also need to make sure weÂ’re rewarding the delivery of evidence-based care, and we think government has a role to focus on not paying for whatÂ’s inappropriate or unnecessary or wasteful, and we encourage Medicare to continue to focus on a pay-for-value model. Without doing that, we think weÂ’re going to be unable to address the value equation of cost and quality.
As part of that, too, we think the regional variation of health-care delivery and the cost associated with that actually helps us in that define and measure category, so we can see that there are places where health care is being delivered with higher value and we ought to strive for the models that produce those results.
MS. LANDRO: And finally, building the health-care work force, the concern about the shortage of all kinds of medical experts.
MR. KINDLER: We have a serious, serious potential shortage of primary physicians in this country because of the way medicine has evolved into being more specialty-focused. We need to invest in creating more jobs and more incentives for primary care — be it from physicians, nurse practitioners or others.
If we want to stimulate jobs in this country, one of our great opportunities and one of our great distinctions as a country is in the sciences, in medicine, in well-paying jobs, and we can actually strike a blow here for two of the things weÂ’re trying to accomplish. We can stimulate jobs and education and training, but focus on an area where we have a huge unmet need of primary-care providers.
The Top Five Recommendations
1. FIGHT OBESITY
Use the presidential office to drive home the prevention message. Make reducing the obesity epidemic the top priority for the new surgeon general and the Centers for Disease Control and Prevention, while addressing race-based health disparities in obesity and other health problems.
2. TORT REFORM
Reform malpractice, using the National Vaccine Injury Compensation Program as a model. Create an environment that protects patients while allowing physicians to practice in high-risk specialties without facing prohibitively expensive insurance premiums.
3. DEFINE VALUE, REFORM PAYMENT
Change the reimbursement system to reward preventive care and evidence-based care, and extend government efforts to no longer reimburse inappropriate, unsafe or wasted care. Move Medicare to a pay-for-value model. Define and measure desirable outcomes for most common diseases. Include costs to government, private sector. Redistribute Medicare payments to favor physicians who perform well. To collect data, wire the nationÂ’s hospitals and doctorÂ’s offices, with government-set standards for interoperability.
4. BUILD HEALTH-CARE WORK FORCE
Focus on primary care. Include registered nurses, nurse practitioners and allied professions, as well as M.D.s. Make sure there are enough professionals to support increased access to care.
5. UNIVERSAL HEALTH INSURANCE
Enact comprehensive health-care reform, including universal access to affordable, quality insurance plans for those not covered by employer-based programs. Require individuals to buy insurance.
Universal Coverage
ALAN MURRAY: This is a very interesting panel both for what floated up to the top — fighting obesity — which I think it’s fair to say none of you would have predicted. But it’s also interesting for what’s not on the list of your top five, universal health-care coverage, something that’s talked about a lot. Could one of you talk about why you think that priority did not rise to the top five? [Editor’s note: In subsequent discussions the task force combined two priorities and made universal health care No. 5 on its list.]
MS. BRALY: I want to say this is a pun, but fighting obesity is like motherhood and apple pie. You know we all love the idea that we can do something as simple as deal with obesity, make sure weÂ’re eating right and our kids are exercising, and weÂ’re going to avoid disease. That had a unique appeal and one that we could all get easily behind.
MR. KINDLER: I think all of us believed that there needs to be universal access to affordable and quality medicine. And we took a vote and we did not really identify a way to pay for it. So thatÂ’s where I think that became an issue.
The SenatorÂ’s Perspective
MR. MURRAY: Senator Baucus, would you like to respond to what youÂ’ve heard?
MAX BAUCUS: I believe strongly that the opportunity is here for us in America to finally have a health-care system that we can really be proud of. But it’s got to be one where everybody is involved. Everybody: consumers, employers, providers, health-insurance companies, everybody. My judgment is that we’ve spent way too much time with patchwork, fixing this part here and that part there, push on the balloon, it bubbles up someplace else, and we just are getting nowhere and we have what we have — namely 40-some million people who don’t have health insurance, 25 million underinsured, a reimbursement system that is out of whack. It rewards volume, not quality. We also are not addressing costs, because costs are going up so much in our country. Costs to individuals, costs to businesses. And also the cost to the federal government with the Medicare trust fund going through the roof.
So my judgment is that first of all you have to have universal coverage. ItÂ’s a disgrace that the United States is the only industrialized country in the world without universal coverage. And the system cannot be repaired without universal coverage. IÂ’m not saying single-payer system. IÂ’m saying a uniquely American system which combines public and private coverage by expanding slightly Medicare, Medicaid, CHIP [ChildrenÂ’s Health Insurance Program], but also making sure that health insurance is available for everybody.
We have an employer-based system in our country. ThatÂ’s the American system. Some suggest scrapping it. I donÂ’t. I think we build on it.
We probably should go look at the employer-provided exclusion in the tax law because itÂ’s regressive. ItÂ’s a little inefficient. But we also need to give incentives to small businesses and individuals so they get health insurance, too.
We need big incentives in changing the delivery system, and through Medicare rewarding quality, working through the National Quality Council, working with evidence-based outcomes, moving to again reward providers, hospitals and physicians based more on quality.
We all have to keep an open mind on all this stuff, figure out how to get to yes. Everything is on the table. The only thing thatÂ’s not on the table is a single-payer system. ThatÂ’s going nowhere in this country.
I know the problem of obesity. I got to tell you, I think thatÂ’s tepid. I just donÂ’t think the bully pulpit is going to be enough to sufficiently fight obesity. WeÂ’re going to have to have incentives in here. WeÂ’re going to have to have teeth in here.
MR. MURRAY: Senator, where does the money come from? YouÂ’re talking about universal health care. Depending on how you do it, youÂ’re talking about what, a trillion-dollar program over a number of years?
SEN. BAUCUS: Oh, no, no, no, no, no. Much, much, much less than that. Much less than that. Much less than that. Orders of magnitude less than that.
MR. MURRAY: How much is it going to cost and where is the money going to come from?
SEN. BAUCUS: Orders of magnitude less than that. WeÂ’re going to have to make some upfront investment here if this is going to work.
MR. MURRAY: Which will cost you money in the short term, but save you money in the long term.
SEN. BAUCUS: Yes, that’s the goal, and we’re going to have an awful lot of oversight here and aggressively do the best we can to make sure we get those savings. The figure you used is –
MR. MURRAY: Do you want to give us a number or youÂ’re not there yet?
SEN. BAUCUS: No.
MR. KINDLER: I just want to underscore the point Chairman Baucus just made. We have to face the music on this. If we try to delude ourselves that somehow weÂ’re going to be able to do this for nothing upfront, itÂ’s not going to happen. That was the point I was making earlier. We have to really put our monies where our mouth is. If we believe that by investing in prevention and wellness we will ultimately save money, increase productivity, increase jobs, improve the economy, then the Congressional Budget Office ought to be able to find a way to support that.
MR. MURRAY: Questions, comments? Anyone?
PAUL DIAZ [president and CEO of Kindred Healthcare Inc.]: I just want to underscore something: the importance of IT as a means by which to reduce costs, improve access and measure the value. But the importance of it, as we talked about, is to link it to the payment reforms, because otherwise it wonÂ’t come together and we wonÂ’t be able to execute on it. And itÂ’s something that touches on all five of the things that we talked about.
SEN. BAUCUS: Everybody talks about health IT. We all know we need it. It hasnÂ’t happened. Why? Partly because weÂ’re America. WeÂ’re not a single-payer system like the UK, which can say, you hospitals, you have to put this in because weÂ’re paying your bills.
But weÂ’re America. WeÂ’re going to find our solution. We need to work with appropriate bodies to develop interoperable standards, then give incentives to providers so they can put the IT systems in.
MR. MURRAY: And that is one of the priorities of this group. Government sets standards for interoperability. Denis Cortese.
MR. CORTESE: If we say the vision of what we’re trying to create is value — better outcomes, better safety, better service with the long-term cost in mind — then the individuals who are providing that care will have to do some fundamental changes in the way they do business. They’ll have to start thinking about how do we engineer. Where’s the lean management? Where are the system engineers that you will begin to bring into the system to help provide that better product that we’re talking about?
You will then instantly start to rely on information technology. It becomes a tool to improve the data, the resources that youÂ’ve got, the information and ultimately the knowledge distribution that is required to develop that very best product. You begin to find ways to simplify the administrative activities.
You begin to create something this country needs. It is outrageous in this country that we do not have a safety reporting board that is similar to what happens in airline traffic. We crash the equivalent of a 747 every day and a half in this country from health-care mistakes and errors. And we donÂ’t report any of that in any central location where systems engineers analyze it, try to understand where the common faults are, and deliver it back out so people can act on that.
These tools that weÂ’re talking about will fundamentally start to be demanded by the providers and the patients when you require a pay for value and you require the patient to focus on value also, which is the behavior issue. You require it on both sides, so this value is a very powerful concept I think that businesspeople intrinsically know, and we need to infuse that in health care.